San Jose Hotel Dispute Pits Owner v. Manager

According to news sources, the owner and the operator of the downtown San Jose Fairmont hotel are locked in widening legal hostilities after the filing of a lawsuit to the hotel’s bankruptcy proceeding.

The conflict has morphed into a full-scale battle after the launch of the litigation, which was filed on June 29 as a sibling proceeding arising from the ongoing Chapter 11 bankruptcy case.

On Tuesday, in a follow-up filing with the Bankruptcy Court, the hotel owner accused hotel operator Accor of deliberately blocking the efforts to reorganize the hotel’s shattered finances through the bankruptcy proceeding.

SC SJ Holdings, the affiliate led by business executive Sam Hirbod that owns the Fairmont San Jose, filed a lawsuit in the U.S. Bankruptcy Court against Accor Management U.S., a large company that manages and operates hotels.

The lawsuit is asking the court to find that operator Accor Management has illegally interfered with the owner’s efforts to stabilize and protect the hotel, which has been closed since March 5, 2021, the day that the hotel filed for bankruptcy.

The legal battle makes it clear that the hotel’s owner and the facility’s operator have become full-fledged adversaries at a time when the lodging’s reopening remains in limbo.

“This is really contentious now,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market. “The relationship between the owner and the operator has gone off the rails.”

The lawsuit also disclosed that the hotel’s finances and operations were already wobbly even ahead of the outbreak of the coronavirus that triggered business shutdowns to combat the deadly bug.

“Before the COVID-19 pandemic, the hotel’s revenues suffered under Accor’s management and limited reservation pipeline,” the hotel owner stated in the lawsuit.

The economic impact of the coronavirus caused the hotel’s fortunes to implode, the court filing stated.

“Revenues took a dramatic and sudden downturn following the spread of the COVID-19 virus and the related travel, gathering, and other restrictions implemented to reduce the infection rate,” according to the lawsuit.

In May, the ownership group picked Hilton Hotels & Resorts as the new manager and operator. Court papers show that Hilton has agreed to inject about $45.8 million in financing to help stabilize the hotel.

Wow, even within the same hotel property we find yet another legal dispute!  They’re everywhere! And when those annoying things negatively impact you and/or your business including landlord/tenant matters, contract issues, nuisance ADA claims and even collections, call in your good guy business litigator, Dean Sperling to resolve YOUR matter with YOUR best interests in mind!  

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